Islamabad – Pakistan’s power sector is facing a crippling financial strain, losing over Rs1 trillion annually due to a combination of technical losses, billing inefficiencies, and systemic issues, according to a recent report by the National Electric Power Regulatory Authority (Nepra). The staggering losses are exacerbating the country’s already precarious economic situation and hindering efforts to provide reliable and affordable electricity to consumers and businesses. This Performance Evaluation Report of Distribution Companies for FY25 paints a grim picture of a sector plagued by longstanding challenges.
The report, released on February 26, 2026, details how distribution companies (Discos) bled Rs397 billion in fiscal year 2024-25 alone. This figure is comprised of Rs265 billion lost to excessive transmission and distribution (T&D) losses and a further Rs132 billion due to poor revenue recovery. When factoring in contributions from K-Electric, the total annual loss surpasses Rs1 trillion, a figure that underscores the urgent need for comprehensive reforms. The situation is further complicated by what Nepra describes as “systemic inefficiencies, weak oversight and operational complacency” within the sector.
Crippling Losses and Uneven Recovery
The extent of the losses varies significantly across different Discos. Peshawar Electric Supply Company (Pesco) recorded the highest losses, amounting to Rs87.48 billion, followed by Quetta Electric Supply Company (Qesco) at Rs52.41 billion, Sukkur Electric Power Company (Sepco) at Rs36.04 billion, and Lahore Electric Supply Company (Lesco) at Rs35.17 billion. Hyderabad Electric Supply Company (Hesco) also contributed significantly, with losses totaling Rs27.14 billion. Despite repeated directives and funding for upgrades, none of the utilities met their assigned loss reduction targets, highlighting chronic implementation failures.
Revenue recovery also presents a mixed picture. While some Discos, including Islamabad Electric Supply Company (Iesco), Gujranwala Electric Power Company (Gepco), Faisalabad Electric Supply Company (Fesco), Lesco, and Multan Electric Power Company (Mepco), achieved a 100% recovery rate, others lagged behind. Pesco reported a 91.5% recovery rate, while K-Electric maintained a recovery rate above 90%. K-Electric’s T&D losses were reported at 14.73% against a target of 14.27% for FY25, though benchmarks are currently under adjudication in the Sindh High Court, adding regulatory uncertainty to Karachi’s power landscape.
Safety Concerns and Circular Debt
Beyond the financial losses, the Nepra report raises serious concerns about safety within the power sector. A troubling decline in safety performance was observed during 2024-25, with a total of 118 fatalities reported across various distribution companies – 38 involving employees and 80 members of the public. Iesco reported the highest number of incidents, followed by Pesco, K-Electric, and Hesco. Companies attributed many accidents to consumer negligence or incidents occurring on private premises.
The regulator also criticized the government’s policy of revenue-loss-based power cuts, stating that it had failed to yield results and instead contributed to the growing circular debt. The circular debt, a longstanding issue in Pakistan’s power sector, arises when power producers are not paid on time, leading to a cascading effect of financial difficulties throughout the supply chain. The unchecked T&D losses and poor recoveries are directly fueling this debt, creating a vicious cycle of financial instability.
Addressing Systemic Issues
Nepra’s report underscores the need for fundamental reforms to address the systemic issues plaguing Pakistan’s power sector. The regulator noted some improvements in certain areas, but emphasized that “enduring issues such as elevated T&D losses, weak revenue recovery, and inadequate safety practices continue to affect operational efficiency.” The most significant concerns remain high T&D losses, poor recovery performance, and unreliable system operations, all contributing to the accumulation of circular debt and the deterioration of service quality for consumers.
The report highlights that no Disco successfully achieved its set targets for technical loss, resulting in an estimated financial loss of Rs265 billion across the sector. Addressing these losses will require significant investment in infrastructure upgrades, improved monitoring and control systems, and stricter enforcement of regulations. Improving revenue recovery will necessitate more effective billing and collection practices, as well as measures to address electricity theft.
The National Electric Power Regulatory Authority (NEPRA) oversees Pakistan’s electricity sector, ensuring transparency and consumer protection. More information about NEPRA can be found on their official website.
Looking ahead, the resolution of the ongoing legal challenges surrounding K-Electric’s tariff determination will be a crucial step in providing regulatory clarity and attracting investment in Karachi’s power infrastructure. The next key development will be the outcome of the Sindh High Court’s adjudication of the matter, which is expected to have significant implications for the city’s power supply and future development. The power sector’s ability to attract investment and implement necessary reforms will be critical to ensuring a sustainable and reliable energy future for Pakistan.
Have your say: What steps do you think are most crucial to address the challenges facing Pakistan’s power sector? Share your thoughts in the comments below.
